The Fight for Financial Literacy
Money plays a central role in nearly every aspect of our lives, except for public school curriculums.
By Taryn Schofield
Coming out of high school, it is a guarantee that graduates will walk away having taken an abundance of math, science, English and history classes. They will probably have had to pass some type of standardized test on one or more of those subjects in order to receive their diploma. However, it is also likely that as they move on to the next phase of their lives – whether it be college, trade school or directly into the workforce – their transcript will be lacking a course in personal finance or economics.
The Government Accounting Office defines financial literacy as, “The ability to make informed judgements and to take effective actions regarding the current future use and management of money. It includes the ability to understand financial choices, plan for the future, spend wisely, and manage the challenges associated with life events such as job loss, saving for retirement or paying for a child’s education.”
Yet, according to a study done by Financial Industry Regulatory Authority (FINRA), an investor education foundation, about 63 percent of Americans could not pass a basic financial literacy quiz. This lack of money management skills among the United States population stems from the lack of personal finance education available to individuals before they are required to make significant financial decisions.
According to Next Gen Personal Finance, a non-profit agency that provides financial literacy curriculum to teachers and individuals, four of five adults say they were never given the opportunity to learn about personal finance, and only 16.4 percent of students nationwide are required to take a personal finance course to graduate high school.
Students from low-income backgrounds are half as likely to take a personal finance course compared to their wealthier peers, according to Next Gen Personal Finance. Only 5.5 percent of the nation’s lowest income students outside of the mandate states are required to take personal finance.
Currently, only Alabama, Missouri, Tennessee, Utah and Virginia require personal finance coursework before high school graduation as a state mandate. Roughly half of those nationwide who are required to take at least a semester of a personal finance course reside in those states.
Money management is a task that will affect everyone at some point in life, yet it is not guaranteed that an individual will be given the opportunity to learn the skills necessary to be successful.
“It doesn’t matter what you choose to pursue, whether you become a mathematician or a biologist or a teacher. All of these things require you to know what to do with your paycheck,” said Yanely Espinal, director of educational outreach for NextGen Personal Finance. “One of the biggest mistakes we can make is not focusing on teaching financial capability to our students.”
The lack of personal finance education in the United States may attribute to a variety of other societal issues, including the student debt crisis.
“At the age of 18, some students are expected to sign on the dotted line that they want to take out a loan to go to college because a majority of Americans are unable to afford to go to college with just their savings or their parents’ savings,” said Espinal. “Many of us are having to take out loans, and those loans’ terms and agreements are really complicated.”
Espinal explained that student loans involve terminology that many people have never been exposed to. A lot of students sign onto loans without understanding unsubsidized versus subsidized or fixed interest versus variable interest rates. Many do not even consider compounding interest and how it works, what a fair interest rate is for a certain amount of money over a certain term or what they could actually end up owing after graduation.
“The fact is that students are not actually explicitly being taught how to understand these topics and how to do the basic math involved with them,” said Espinal. “That’s why American students are in such a crisis right now with trillions of dollars of debt. They lack the ability to make that connection because they haven’t been guided through that in school.”
The effects of little finance education are further translated in the financial issues many Americans face. According to the Federal Reserve Board, 40 percent of U.S. adults do not have enough savings to cover a $400 emergency.
“What we’re seeing today is that a majority of the population is able to get by on a day-to-day, paycheck-to-paycheck basis, but at that point, if there was an emergency, folks don’t have the extra money to cover it,” said Espinal.
“These are concerns that you hear across the country, even in the adult world,” said Reid Sclafani, a finance teacher at Garden City High School, “Individuals are not understanding credit cards, mortgages, basic investing and credit scores and how that affects them. All of those things, not matter what you do in life, have an effect on how financially efficient you live or not.”
Sclafani’s finance course is not a graduation requirement at Garden City High School, but it is offered as an elective in the business department. The course curriculum includes units about personal budgeting, doing taxes, understanding credit and loans, planning finances for car and home purchases and understanding the stock market.
While the need for financial literacy is widely recognized, there are still challenges in making personal finance curriculum accessible and effective.
“Some of the largest challenges that we’ve seen, one that we’ve heard from a lot of teachers and principals at varying schools, is that there’s a shortage of content knowledge within the staff they do have,” said Espinal. “Teachers were never taught the content, and if they’re expected to teach it, not only is the knowledge of the content and material important, but the confidence they need to teach it is also not there.”
According to Catherine Sturtz, the co-president of the Long Island Business Teachers Association, other challenges lie in collecting resources for classes.
“Resources sometimes can be difficult,” said Sturtz. “Although there are many available, they are not always in one place.”
Even in states and districts where finance and consumer education are required or offered within the curriculum, the content covered in the classes offered may not be enough to adequately prepare students with the skills needed post-graduation.
Sarah Hanlon, a senior journalism major at Hofstra University, was required to take a personal finance course prior to graduating from Hamburg Area High School in Hamburg, Pennsylvania. The focus of her course was primarily centered around budgeting; how to budget, what an individual should budget for and how to practice budgeting using a real-life example. One of her major class projects was planning and budgeting for a trip using a limit of $2,000.
“We had to evaluate flight prices, hotel fares, food and drink prices, and everything else that you have to pay while on a trip,” said Hanlon. Once the trip was planned, the class was required to present how they used their money in a financially responsible way.
“That was really helpful for me as it made me realize how you have to plan to use your money,” explained Hanlon. “It gave me an idea of what it takes to manage money wisely.”
However, while the budgeting project helped her realize the preparation that needs to go into spending money, Hanlon feels as if she missed out on learning other more practical skills regarding personal finance that could help her later in life.
“I wish we had focused more on things like filing taxes, how to manage student loans, how to budget for bigger things like a car, a mortgage, an apartment, etc.” said Hanlon. “That would have been much more beneficial to my life now than my fake trip to London.”
While being required to take at least one course is certainly useful to students, Hanlon feels she would have benefitted from additional course offerings outside of her graduation requirement.
“I appreciate the basics of financial education it gave me, but that was only a foundation,” said Hanlon. “I would have loved if I could have taken additional high school courses or even college courses that went further into depth about financial education so I could be better prepared for my future.”
Although Hanlon’s high school personal finance course was not perfect, she feels that it is imperative that these classes are required within curriculum. Students acknowledge the importance of learning practical skills that will have real-world application.
“I appreciate that this was a graduation requirement because my knowledge of personal finance before this class was nonexistent,” said Hanlon. “I really think these courses are a must for all high school and college students because financial responsibility will be part of everyone’s life.”
“Students enjoy learning about things that they can relate to or make a connection to in the real world and personal finance is everywhere,” said Sturtz.
While students may acknowledge the importance of financial literacy courses, they are often not prioritized because they are either unavailable or simply just electives.
“Ultimately, I think what we’d all like to see is a state mandate by every state that financial literacy be part of graduation requirement,” said Sclafani. “That’s where it should be moving, and it slowly seems to be. If there’s any direction at all, it’s positive; it’s just slow.”
In New York, the completion of a personal finance course before graduation is not currently mandated. In the 2017-18 legislative calendar, two bills proposing the requirement for students in grades 9-12 were left in committee after being referred to the Department of Education. Currently, for the 2019-20 legislative calendar, a similar bill has been filed, and yet again it sits in committee after being referred to the Department of Education on Jan. 24, 2019.
“Financial literacy is an essential skill for navigating adulthood,” said Assembly Member Rebecca Seawright, a lead sponsor on the bill. “Constituents reported to me that our public schools do not provide basic financial education courses for students. In New York state only career technical schools are required to provide personal economic education prior to graduation.”
Assembly Member Seawright says that now that the bill has been referred to the Department of Education, the next step is organizing collaboration with her fellow sponsor Senator Leroy Comrie to bring both education and financial literacy advocacy groups together to promote passage in both houses.
One focal point may be with districts that have the resources to integrate a personal finance course into the curriculum making it a requirement for their students on a district level.
“New York is a state where it is not mandated that students take a full semester of finance, yet there are certain schools that are mandating it within their school; that are making it a required course for the students,” said Espinal. “It’s time to figure out where this is happening and connect all of those dots so that we can learn from what’s already being done.”
If the bill does pass in New York, it would up to the State Education Department to implement the curriculum with input from the New York City Department of Education and local school boards, especially those with finance courses already designed within their districts.
Overall, increasing the accessibility to financial literacy courses is going to come down to collaboration and discourse.
“It’s going to take a lot of collaboration between educators, researchers, local, state, and federal legislators, and community advocates,” said Espinal.
“A majority vote of both houses is required for any legislation,” said Assembly Member Seawright. “Advocacy groups can greatly impact the process by providing reliable research as to the need for financial education to ensure educated consumers.”
Referencing the steps taken in states that have already achieved a financial literacy requirement may be the best way to make it a more widespread phenomenon. Among the progress that is happening, too much of it is being done in isolation.
According to Espinal, if more advocates could come together, the outlook of achieving “high-quality, free universal finance education” for all students may be attainable.
“In order for any and all students across the board to get access, we have to come together to see what the legislators in these states did, what researchers found, and what educators did at their particular schools.”